Extended Limitation Period Not Applicable for Revenue’s Change of Opinion: CESTAT Hyderabad

Varsity Education Management Pvt Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)

Summary: In the case of Varsity Education Management Pvt Ltd vs. Commissioner of Central Tax, CESTAT Hyderabad held that the extended period of limitation cannot be applied for changes in the revenue’s opinion. Varsity, registered since 2012, provided services like cleaning, cooking, and fleet management, largely to educational institutions. The revenue raised demands for service tax on these services from 2011-13, despite similar services previously being exempt or classified differently. Varsity argued that cooking services only involved supplying manpower, not food, negating the classification as “outdoor catering.” For cleaning services, they cited exemptions, as educational buildings were non-commercial. Fleet management merely involved drivers, which Varsity claimed should not fall under “Management, Maintenance or Repair Service.” Despite having complied with prior tax correspondence, a Show Cause Notice (SCN) was issued after 39 months, invoking extended limitation without proving fraud or suppression. CESTAT agreed with Varsity, referencing prior judgments that similarly dismissed tax demands based on mere reclassification attempts by revenue. This ruling emphasizes that revisiting service classifications without new evidence does not justify extended limitation, especially when businesses have complied transparently with tax inquiries.

Introduction:In the recent case of Varsity Education Management Pvt. Ltd. (2024), 23 Centax 86 (Tri.-Hyd), the Hon’ble CESTAT Hyderabad has emphasized a crucial aspect of the Service Tax regime concerning the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994.

In this case, the appellant, provided services such as cleaning, cooking, and fleet management to educational institutions. The authority issued SCN under extended period of limitation alleging that the Service tax was due on certain services provided, including cleaning and fleet management. The basis for invoking extended period was that the authority discovered the non-payment of Service Tax only during a detailed investigation. The SCN further stated that, under the self-assessment procedure, it was imperative for the assessee to have diligently discharged their Service Tax liability.

Upon review, the CESTAT noted that the list of documents relied upon in the SCN itself indicated that the appellant had regularly filed their returns. There was no allegation of misstatement or suppression in those returns, nor was it alleged that the appellant had failed to disclose their full turnover. The only assertion made by the Authority was that they became aware of the non-payment of Service Tax only during their investigation. This led the Tribunal to conclude that the SCN was issued merely on the basis of a change of opinion, without any evidence of suppression, fraud, or willful misconduct.

Having established strong case on limitation, the Tribunal found no necessity to delve into the merits of the case. It referred to previous rulings, including Delta Power Solutions (India) Pvt. Ltd. – 2022 (137) taxmann.com 367 (CESTAT, New Delhi) and Sunshine Steel Industries – (2023) 8 Centax 209 (Tri.-Del), wherein similar issues were decided in favor of the appellants solely on limitations without addressing the merits.

In present circumstances as well, where GST returns are being regularly filed on the common portal, wherein all supplies are been disclosed and financial statements are provided with Annual GST returns; invoking extended period solely on this basis that in the era of self-assessment, responsibility is cast upon the taxpayer, and it was only during the audit/investigation the fact of evasion has come to the knowledge of the department would not suffice.

Similar view was expressed by the Bench of CESTAT in the case of G.D Goenka ST Appeal No. 51787 OF 2022, where the tribunal held:

a) The appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.

b) It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgment assessment under section 72 and issue an SCN under Section 73 within the time limit. If the officer does not do so, and any tax escapes assessment, the responsibility for it rests on the officer.

c) Although the Central Excise Officer is empowered to scrutinise all the Returns call for records and if necessary, make the best judgment assessment, if, as per the instructions of CBIC, the officer does not conduct a detailed scrutiny of same Returns and as a result is unable to discover any short payment of tax within the period of limitation, neither the assessee nor the officer is responsible for such loss of revenue. Such a loss of Revenue is the risk taken by the Board as a matter of policy.

d) Extended period of limitation cannot be invoked unless there is evidence of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of Act or Rules with an intent.

e) Intentional and wilful suppression of facts cannot be presumed because (a) the appellant was operating under self-assessment or (b) because the appellant did not agree with the audit and claimed that CENVAT credit was admissible; or (c) because the appellant did not seek any clarification from the Revenue; or (d) because the officer did not conduct a detailed scrutiny of the Returns and the availment of CENVAT credit which is alleged to be inadmissible and was discovered only during audit.

The Appellant – M/s Varsity Education Management Pvt Ltd (M/s Varsity for short), was incorporated in the year 2010 and was engaged in sale of books and provision of various services. They were registered with Service Tax department since 01.06.2012 for providing output service under the categories of ‘Management Consultants service’ & ‘Commercial Training or Coaching service’.

2. During the period 2011-12 and 2012-13, the appellant received income under three heads – (i) Cleaning & Housekeeping, (ii) Cooking services & (iii) Fleet Management services. During the year 2011-12, these services were provided to Sri Kalyana Chakravarti Memorial Educational Trust (SKCMET for short), Nexgen Educational Trust (Nexgen for short) and Sri Chaitanya Educational Trust (Sri Chaitanya for short). All the three recipient entities are running educational institutions. The period of dispute is 2011-12 & 2012-13 (prior to 01.07.2012). Prior to 01.07.2012, the services were taxed with specific description/classification. The appellant had the following incomes during the period under dispute:

3. Learned Counsel urges – so far cooking service is concerned, all the grocery and gadgets including space are provided by the service recipient institutions and the appellant is only providing competent manpower for cooking the foods/beverages. In the circumstances, there is no supply of food by the appellant and hence they do not fall under the definition of ‘outdoor caterer’. Further, in view of the ruling of this Tribunal in Rajiv Kumar Gupta vs CCE, Jaipur [2009-TIOL-864-CESTAT-DEL], the Division Bench has held that where assessee was running a canteen within a factory and where infrastructure with electricity is provided by the company, it was held that since the entire facilities are provided by the company itself, the assessee only cooks food and serves it to company’s employees, no demand is sustainable under the head ‘outdoor catering services’. Similar view was also taken by this Tribunal in CCE & ST, Chennai-III vs Indira Gandhi Industrial Co-Opeartive Society Ltd [2018 (11) TMI 1090 – CESTAT Chennai], wherein the assessee had entered into an agreement with BHEL to provide qualified cooking supervisor and labourers necessary for catering service and cleaning service, this Tribunal took notice that it is not coming out from the records or the agreement that the assessee had supplied any food/eatables to the premises of BHEL and by merely supplying the necessary staff for running a canteen will not amount to providing outdoor catering service. Similar view was also taken by the Single Member Bench of this Tribunal at Mumbai in Kalsis Kitchenette [2010-TIOL-1319-CESTAT-Mum] following the ruling in Rajiv Kumar Gupta case (supra).

4. So far the cleaning service is concerned, the same has been defined in section 65(24b) as – ‘cleaning activity’ means cleaning, including specialized cleaning services such as disinfecting, exterminating or sterilizing of objects or premises, of –

i) Commercial or industrial buildings and premises thereof; or

ii) Factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof,

Non-commercial buildings are not covered under the definition (Ref: CBEC Letter F.No. B1/6/2005-TRU, dated 27.07.2005)

5. Further urges – with respect to Cleaningservice,the Division Bench of this Tribunal in Maltanb Construction Engineers Pvt Ltd vs CCE & ST, Coimbatore [2019 (22) GSTL 65 (Tri-Chennai)], where the assessee was providing cleaning service to buildings used for running educational institutions recognized by law, it was held that buildings being used by recognized educational institutions cannot be considered as commercial in nature. Similar view was taken by another Division Bench of this Tribunal in the case of Bombay Intelligence Security (India) Ltd vs CST, Mumbai-II [2015 (40) STR 157 (Tri-Mumbai)] where cleaning services were provided to Govt. Hospitals, Govt. Educational Institutions, Horticulture, Agriculture, Housing Societies, etc., it was held that such services undertaken in respect of non-commercial and non-industrial establishments, is not liable to service tax.

6. So far fleet management service (transportation) is concerned, the appellant only supplies drivers and cleaners. The said service is not taxable under the head ‘Management, Maintenance or Repair service’ (MMRS). Further, under Notification No.14/2004-ST ‘Business Auxiliary services’ (BAS) provided in relation to education are exempted. Further, in the similar case of Junior Varsity, Revenue had demanded service tax under ‘Business Support service’ (BSS), which demand was set aside by this Tribunal vide Final Order No. A/30645-30647/2019 dt.16.09.2019.

7. In the present disputed period, Revenue has again raised the demand for the same service by changing the classification as MMRS. What is exempted under one category cannot be taxed under a different category as held by this Tribunal in Dr. Lal Path Lab Pvt Ltd vs CCE, Ludhiana [2006 (4) STR 527 (Tri-Del)].

8. It is also mentioned by the appellant that in the earlier proceedings in the matter of Junior Varsity (under same management) – Assessee, the Revenue for these very services, vide OIO dt.12.11.2015 had held that all the services provided under the contract merit classification as single service under the head BSS and cannot be vivisected, which view is diagonally opposite to the view taken in the present proceedings.

9. So far the tax demanded under Reverse Charge Mechanism on services like GTA, Legal and Works Contract is concerned, the same has been raised vaguely without proper verification of the records and the books of accounts and hence, the same are not sustainable.

10. It is further urged that evidently the demand has been raised for the period 2011-12 & 2012-13 (till June 2012) vide SCN dt.13.11.2015 i.e., after 39 months, by invoking extended period of limitation. It is admitted fact that the appellant was registered with the department when making compliances and were in correspondence vide various letters dt.01.08.2012, 06.08.2012, 27.11.2012, 21.10.2013, 12.11.2013, 05.09.2014 and 30.10.2015 and had been replying to queries and furnishing documents as desired. Thus, the SCN is issued evidently by way of change of opinion and no case of suppression, misstatement or fraud, etc., is made out. Thus, the SCN is bad for invoking extended period of limitation. Accordingly, learned Counsel for appellant prays for allowing their appeal and setting aside of the impugned order.

11. Opposing the appeal, learned AR for Revenue states that the appellant had entered into an agreement dt.16.09.2011 with SKCMET for provision and maintenance of mess facilities. The authorized signatory in his statement has stated that the assessee is completely responsible for cooking service and these services are provided in the premises of the recipient educational institutional trust. He also stated that their job is to provide required quantity of food preparation as per requirement of the institution. Thus the appellant satisfies the conditions for outdoor catering service viz., (a) service provided to any person by outdoor caterer, (b) service by way of supply of foods, edible preparation, etc., (c) provision of service at a place other than his own. It is immaterial who provides the ingredients for preparation of food/beverages or the materials like utensils, gadgets, ovens, etc. Reliance is placed on the ruling of this Tribunal in P. Siva Prasad vs CCE, Hyderabad-III [2019 (27) GSTL 233 (Tri-Hyd)], wherein the assessee was engaged in sale of food and beverages on trains and platforms under contract awarded by IRCTC to supply food items. Assessee got his food items from pantry car run by IRCTC and in turn sold them to the passengers and out of the sale proceeds, the assessee kept his share/commission and handed over the rest to IRCTC. This Tribunal held that the said activity is liable to service tax relying on the ruling of Hon’ble Allahabad High Court in Indian Coffee Workers’ Co-op Society Ltd [2014 (34) STR 546 (All.)] and also the ruling of Hon’ble Kerala High Court in Saj Flight Services Pvt Ltd [2006 (4) STR 432 (Ker.)], wherein it was held that supply of food on the aircrafts amounts to outdoor catering.

12. Learned AR further contends that as per the agreement dt.16.09.2011, nowhere specifies that the recipient institution requires supply of person or manpower. Agreement also does not specify that they require so many number of cooks/chefs and helpers nor did they specify that they require so many number of skilled and unskilled labour, nor they specified breakup of male and female workers, nor did the agreement specify the working hours or number of days of working in a month. Further, there is no specific rate provided for providing skilled/unskilled labour. Evidently, appellant has undertaken to execute food preparations/cooking service on the basis of lump sum consideration. It is also urged that reliance placed on the ruling in Rajiv Kumar Gupta case (supra) is not tenable as the said order was passed by the Single Member Bench and also is not a reasoned order. Further, the precedent ruling of this Bench in P. Siva Prasad will have a binding effect.

13. He further urges in respect of MMRS (Cleaning service and transportation management provided to the educational institutions), the appellant has agreed to provide management of transportation facility provided to the students directly or through its agents and further has agreed to provide maintenance and housekeeping service being maintenance of campus, class rooms, laboratories, etc., and all other facilities of educational institutions. The contention of the appellant is erroneous that they are providing facility of maintenance and housekeeping which is nothing but cleaning service and is separately classifiable under the head ‘cleaning service’ under section 65(24b). The said contention is erroneous as cleaning activity mainly covers cleaning including specialized cleaning whereas MMRS covers any service provided by a person regarding maintenance or repair of properties whether immovable or not as defined under section 65(64)(i)(b), which is the more appropriate service head.

14. Learned AR further urges that in respect of dispute to service tax under the head ‘commercial coaching or training’, the Larger Bench of this Tribunal in the case of Sri Chaitanya Educational Committee [2019 (29) GSTL 712 (Tri-LB)] had held that the assessee – Chaitanya is covered under the definition of ‘commercial training or coaching centre’.

15. It is further urged that under the agreement, the appellant has agreed to provide management of transport facilities to the educational institutions and further the authorized signatory in his statement had stated that they provide management of transport facility and they are responsible for the complete transportation of institutions. It was also stated that drivers are allocated on route basis and vehicle wise, and they monitor the functioning and movement of vehicles.

16. As regards the ground of limitation taken by the appellant, it is urged that suppression of facts alone is good enough reason for invoking extended period. The appellant was a registered assessee and was well aware of the service tax provisions. The appellant is running business having turnover in crores. Both the appellant and the clients have been facing proceedings before the Service Tax authorities. Thus, the appellant being of the view that they were not liable to service tax with respect to the services in dispute herein is not bonafide. The appellant has chosen to contradict the classification of the services made by the department without assuming the responsibility for non-payment of service tax even as per their own belief or understanding. Further, reliance is placed on the following decisions:

a) ICICI Econet Internet & Technology Fund vs CCE, Bangalore [2021 (51) GSTL 36 (Tri-Bang)

b) Kopran Ltd vs CCE, Raigad [2011 (23) STR 627 (Tri-Mum)]

c) Bhushan Steel & Strips Ltd [2014 (310) ELT 198 (Tri-Mum)]

d) Suzlon Infrastructure vs CCE, Pune-III [2012 (283) ELT 49 (Tri-Mum)]

e) Prathyusha Associates Shipping Pvt Ltd vs CCE, Visakhapatnam-I [2014-TIOL-1619-CESTAT-Bang]

f) Lakhan Sing & Co. vs CCE, Jaipur [2016 (46) STR 297 (Tri-Del)]

17. Accordingly, learned AR prays for dismissing the appeal and to uphold the impugned order.

18. Having considered the rival contentions, we find that the appellant was registered with the department and have maintained proper records of their transactions. This is evident from the SCN, wherein the list of relied upon documents is given as follows:

a) Copy of Service Agreement dt.16.09.2011 entered into between SKCMET and M/s Varsity.

b) Copies of Work Orders all dt.01.04.2012 placed by SKCMET, Nexgen and Sri Chaitanya.

c) Copies of Balance Sheets for the years 2011-12 & 2012-13 of the assessee.

d) ST-3 Returns filed by the assessee for the years 2012-13.

e) Information provided by the assessee vide letters dt.21.10.2013, 12.11.2013, 19.10.2015 & 30.10.2015.

f) Statements dt.09.07.2015 & 28.10.2015 of Sri Sreeram Athota, Finance Controller of M/s Varsity.

19. From the aforementioned list of documents relied upon by the Revenue, it is evident that the appellant has regularly filed the returns. Further, we find that there is no allegation of any misstatement or suppression in the returns. It is also not the allegation that the appellant has not disclosed their full turnover in the returns. The only allegation of Revenue in the SCN is that they came to know the fact of non-payment of service tax on the services under dispute only during the course of detailed investigation undertaken, and further have stated that under the self-assessment procedure it is imperative that the assessee should have scrupulously discharged the service tax liability. Thus, it is evident that the SCN has been issued by way of change of opinion and no case of suppression, misstatement, fraud or any contemptuous conduct is made out. Therefore, we are of the considered opinion that the Department has not made out any case for invoking extended period and thus, the appellants succeed on the issue of limitation.

20. We also take notice that for the similar services earlier provided by M/s Junior Varsity and M/s K12 Educational Management (same group companies), the department had bundled the services on the ground that these services are provided to same recipients and the classification under three different heads is erroneous as services are provided to single entity or service recipient. Thus, it appears, prima facie, that there is no consistency in classification of services by the Revenue. However, having found that the appellants have a strong case on limitation, we find that there is no need to consider submissions on merits. We find that the Principal Bench of the Tribunal in the cases of Delta Power Solutions (India) Pvt. Ltd. – 2022 (137) Taxmann. com 367 (CESTAT, New Delhi) and Sunshine Steel Industries – (2023) 8 Centax 209 (Tri. Delhi) (upheld by the Hon’ble Supreme Court (2023) 8 Centax 210 (SC) has decided the issue in favour of the appellants on limitation alone without going into the merits of the case.

21. In view of our aforementioned findings with respect to facts on record, we hold that extended period of limitation is not invokable. Accordingly, we allow the appeal on the ground of limitation and set aside the impugned order. Appellant shall be entitled to consequential benefits, in accordance with law.

(Pronounced in the Open Court on 04.04.2024)